In 2013, Alexandra Acosta-Conniff, an Alabama school teacher and single mother of two children, filed an adversary proceeding in an Alabama bankruptcy court, hoping to discharge student loans that had grown to $112,000. She did not have an attorney, so she represented herself in court.
At her trial, Judge William Sawyer applied the three-part Brunner test to determine whether Acosta-Conniff met the “undue hardship” standard for having her student loans discharged in bankruptcy.
First, Judge Sawyer ruled, Conniff could not pay back her student loans and maintain a minimal standard of living for herself and her two children. Thus she met the first part of the Brunner test.
Second, Conniff’s economic circumstances were not likely to change in the foreseeable future. Conniff was a rural school teacher, Judge Sawyer pointed out, who could not expect a significant rise in income. Although she had obtained a doctorate in education, that doctorate had not paid off financially.
Third, Judge Sawyer ruled, Conniff had handled her student loans in good faith. She had made monthly payments over several years and she had obtained deferments from making payments–deferments she was eligible to receive. In Judge Sawyer’s view, Conniff met the good-faith requirement of the Brunner test.
In short, Judge Sawyer determined, Conniff qualified for bankruptcy relief under the Bankruptcy Code’s “undue hardship” standard as interpreted by Brunner. Accordingly, the judge discharged all of Conniff’s student-loan debt.
ECMC appealed, and Judge Keith Watkins reversed. Fortunately, retired bankruptcy judge Eugene Wedoff volunteered to represent Conniff without charge, and Wedoff and his associates took her case to the Eleventh Circuit Court of Appeals.
In 2017, four years after Conniff filed her adversary proceeding, the Eleventh Circuit reversed the trial court, directing Judge Watkins to review Judge Sawyer’s ruling under the “clear error” standard. In other words, unless Judge Sawyer had committed clear error in deciding for Conniff, Judge Watkins was bound to uphold Sawyer’s decision. The Eleventh Circuit remanded the case back to Judge Watkins to straighten things out.
In January 2018, Judge Watkins issued his second opinion in Conniff’s case, and he concluded that Judge Sawyer had indeed committed clear error when he ruled in Conniff’s favor. Judge Watkins’ opinion is convoluted and poorly reasoned, but basically, he said Judge Sawyer made a mistake in failing to determine whether Conniff was eligible for an income-contingent repayment plan (ICRP).
In Judge Watkins’ opinion, if Coniff can make even small loan payments under an ICRP and still maintain a minimal standard of living, she is not eligible for bankruptcy relief.
So what does this mean?
It means Alexandra Acosta-Conniff must go to trial a second time–more than three years after her first trial. Under the instructions Judge Watkins gave in his 2018 opinion, Judge Sawyer will find it very difficult to rule in Conniff’s favor a second time.
Conniff owed $112,000 in 2015 when she was 44 years old. Her debt has grown over the last three years due to accrued interest, and Conniff is older. She is now 47 years old.
What does the future hold for Alexandra Acosta-Conniff? More litigation.
If Conniff wins her second trial, ECMC, ruthless and well-financed, will appeal again; and the case will ultimately go back to the Eleventh Circuit a second time. Conniff now has an able lawyer, so if she loses before Judge Sawyer, she will likely appeal. So–win or lose–Conniff is in for two or three more years of stressful litigation. When this is all over, Conniff will likely be at least 50 years old.
Here’s my take on Conniff’s sad odyssey through the federal courts. First, Judge Watkins’ most recent decision is insane. In Watkins’ view, a student-loan debtor who can make even small loan payments under an ICRP while maintaining a minimal standard of living cannot discharge her student loans in bankruptcy: period.
But if that were true, then no student-loan debtor is eligible for bankruptcy relief. In several cases, ECMC or the U.S. Department of Education has argued that a student-loan debtor living at or below the poverty line should be denied bankruptcy relief and required to enter into an ICRP even though the debtor would be required to pay zero. In fact, ECMC and DOE have been arguing for years that basically every destitute student-loan debtor should be put in an ICRP and denied bankruptcy relief.
Do want some examples? Roth v. ECMC (9th Cir. BAP 2013), Myhre v. U.S. Department of Education (Bankr. W.D. Wis. 2013), Abney v. U.S. Department of Education (Bankr. W.D. Mo. 2015), Smith v. U.S. Department of Education (Bankr. D. Mass. 2018).
The Roth case illustrates the insanity of this point of view. In that case, ECMC fought bankruptcy relief for Janet Roth, an elderly retiree with chronic health problems who was living on less than $800 a month in Social Security benefits. Put her in an ICRP, ECMC insisted, even though she would be required to pay nothing due to her impoverished circumstances.
The Ninth Circuit’s Bankruptcy Appellate Panel pointed out the absurdity of ECMC’s position. It would be pointless to put Roth in an ICRP, the court ruled. “[T]he law does not require a party to engage in futile acts.”
Forcing Alexandra Acosta-Conniff into an ICRP, which Judge Watkins obviously desires, is a futile act. She will never pay off her student loans, even if she makes small monthly income-based payments for the next 25 years.
Acosta-Conniff is a big, big case. If Judge Watkins’ hardhearted view prevails, then bankruptcy relief for student-loan debtors is foreclosed in the Eleventh Circuit. If the compassionate and common-sense spirit of Judge Sawyer’s original 2013 opinion is ultimately upheld, then distressed student-loan debtors like Alexandra Costa-Conniff will get the fresh start that the bankruptcy courts were intended to provide.
The Eleventh Circuit Court of Appeals will ultimately have to look at Alexandra Acosta-Conniff’s case a second time. But her next trip to the Eleventh Circuit is likely at least two years away. – Source